Royal Bank of Scotland said on Friday it will float 314 branches as a standalone bank in about two years, after reaching a £600-million deal with investors including the Church of England.

Royal Bank of Scotland said on Friday it will float 314 branches as a standalone bank in about two years, after reaching a £600-million deal with investors including the Church of England.

Edinburgh-based RBS said in a statement that it would re-launch the branches under its dormant Williams & Glyn's bank brand, which will then be floated on the London stock market.

The bailed-out British lender, which is 81% owned by the government, has been forced to sell the branches by the European Commission in return for state support. A deal to sell the outlets to Spanish giant Santander collapsed last year.

The consortium – led by private equity firms Corsair Capital and Centrebridge Partners – will pay £600 million ($967 million, 713 million euros) for a bond that will convert into no more than a 49% stake in the W&G branches, once they are spun off.

The consortium also includes the Church Commissioners for England, who manage the assets of the Church of England.

"We are delighted to be working in partnership with these investors to establish a new challenger bank for UK customers," said RBS chairman Philip Hampton.

"Williams & Glyn's will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking – a sector that is so crucial to the UK's economic recovery.

"Much has been done already in building the standalone business, and today's announcement provides more certainty for our customers and employees ahead of a flotation."

RBS was required to reduce its branch network as part of EC penalties after it received a vast £45.5-billion bailout at the height of the global financial crisis.

The announcement comes after rival state-rescued lender Lloyds Banking Group relaunched 631 of its British branches as a standalone bank under its old TSB brand.

LBG – which also received a huge bailout amid the global financial crisis – plans to float the TSB business on the London market next year, after it also failed to offload the branches.

Earlier this month, the British government earned £3.2 billion from selling 6% of Lloyds, in a deal which cut its overall holding to about 32.7%.